Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Guest Commentary: American Hotel Register Makes Every Load and Mile Count

Cloud/Software-as-a-Service | By •

As a frequent guest in hotels across the country, I have many more idiosyncrasies about things like linens, shampoos, coffee and ice buckets than the normal traveler. By no means do I express the eccentric behavior of Mr. Bean, rather I’m more curious about where these items came from and how many trucks it took to get them here. Typically, hotels use suppliers to fill rooms with everything from teeny tiny soaps to bed frames and box springs.

American Hotel Register is one of the premier suppliers to the hospitality industry for more than 145 years. The family-owned company offers hotels the broadest product selection, ranging from sheets and towels to amenities and equipment to fixtures and furniture. With seven domestic and four international DCs, American Hotel Register provides next day delivery service by private fleet, small parcel, LTL, and other modes of transportation.

The company previously used a paper routing guide to manage its entire transportation process. With more than 34,000 SKUs and 500 overall suppliers, American Hotel Register saw an immediate need to reduce transportation spend. Like many companies lacking a proper transportation management system (TMS), American Hotel Register lacked visibility into its procedures; therefore, it was wasting a significant amount of time and money every year.

American Hotel Register evaluated TMS solutions available on many different delivery platforms, from installed to hosted to software-as-a-service (SaaS). The company ultimately selected a SaaS TMS because it offered the quickest ROI, while meeting its objectives for enhanced visibility, process automation, and inbound shipment optimization (among other things).

After an 8-week implementation, the company achieved net transportation savings of 13 percent, a 60 percent reduction in non-compliance issues, and consolidation loads increased from an average of 2 per month to 27 per month. Most importantly, the company received complete ROI within 2 months. Now American Hotel Register is able to analyze metrics such as lead times for suppliers, tender acceptance to better manage carriers, and track weekly/monthly freight savings.

“Our goal was to save $2,000 per day right out of the gate, with the first two months exceeding $100,000,” said the Vice President of Distribution and Logistics of American Register Hotel. “We’re currently well above those numbers, which doesn’t even include the results of our procurement event yet.”

So, what is the key takeaway here?

Companies that are still using manual or legacy systems are blindfolding themselves to the cost savings and transportation process optimization that a software-as-a-service TMS platform can provide. The benefits of SaaS solutions include:

  • Visibility: SaaS TMS solutions give shippers, carriers, suppliers, consignees and other trading partners the ability to conduct business on the same software instance, on the same platform. As a result, users have visibility across the entire network of members, as well as into their own supply chain, to determine best moves.
  • Collaboration: A SaaS TMS enables multiple parties to leverage technologies through a common platform and gain access to a collaborative network. It also provides opportunities to connect with other network members for additional capacity.
  • Scalability & Flexibility: Having control of your transportation process on one platform allows you to continuously integrate and easily access data resulting in an efficient and cohesive supply chain. With a SaaS TMS, companies can scale infrastructure to proactively react to shifts in the supply chain and quickly adapt technology based on changing business needs.
  • Cost Structure: Companies can better manage their bottom line with SaaS TMS solutions while seeing greater savings at a faster rate. SaaS-based TMS lack the large up-front investments usually required by installed solutions and typical implementation is 10-12 weeks.

The bottom line: By gaining visibility into the process, transportation professionals can make every load and every mile count. Even the simplest item, such as teeny tiny hotel soap, is impacted by technology available in the transportation industry.

Chris Timmer is Chief Operations Officer at LeanLogistics. Chris is responsible for overall strategy, positioning and growth of the LeanLogistics solutions, including SaaS platform development and deployment and the expansion of the company’s service footprint internationally. Chris has over 20 years of experience in transportation and logistics management and he regularly speaks at industry events and has been recognized as a leader in the SaaS solution space.

Guest Commentary: Is Cloud-Based WMS a Real Option for Complex Distribution Centers?

Cloud/Software-as-a-Service | By •

Three years ago, I thought the probability of using an outsourced warehouse management system (WMS) to run a complex distribution center was low. Today, my perspective on this topic has dramatically changed. The pervasiveness of virtualization technologies, which now enable infrastructure-as-a-service (IaaS), has ushered in a new computing platform, “the cloud,” which is perfect for WMS deployment.

A few years ago, SaaS transportation management systems (TMS) were emerging as a credible option for enterprises of all sizes, and industry experts wondered if the same could be true for WMS. SaaS TMS has the benefit of a user constituency of desktop PC users. These users are able to access the TMS through a Web browser and the browser is a sufficient way for them to interact with the application. WMS, on the other hand, is primarily used by people who are not tied to a desktop. These users typically interact with the application via mobile computers that may include bar code, RFID and voice interaction capabilities. Additionally, speed and response of the user interface are paramount for many warehouse tasks. And most importantly, WMS is one of the most customized applications in the enterprise. Three years ago, it just did not seem possible that any outsourced model could provide the flexibility required for most WMS users. Today, the outlook is considerably changed.

Defining SaaS and Cloud
The terminology around this new method for delivering application software can be quite confusing. Microsoft’s television advertisements would have you believe that “cloud” is a new way to watch television shows when stranded at the airport (see commercial).

SaaS, Cloud and Hosted are often used interchangeably; however, there are technical differences. In most cases, SaaS refers to a system that is single instance, multi-tenant. A single instance, multi-tenant model is one where every enterprise (tenant) using the system is running the exact same version (instance) of the software. Cloud and Hosted are similar in that each customer runs a version of the software that can be personalized to their specific needs. Hosted and Cloud solutions typically provide the same personalization capabilities as an on-premise system. The primary difference between Hosted and Cloud is that Cloud uses emerging server virtualization technology to quickly and inexpensively add computing resources. Traditional Hosted solutions typically have high hardware costs because there is dedicated hardware infrastructure for each customer.

“One Size Fits All” Does Not Fit Most Distribution Centers
I have been in many distribution centers. Frankly, they almost all look the same for the first five minutes I am there. They all typically have racking, fork trucks, and some type of automated material handling equipment. However, after five minutes, it becomes obvious that no two distribution centers work the same way. There are unique product handling requirements, building layout considerations, and even local workforce customs that drive specialized processes in many distribution centers. The key for a successful WMS adoption is being able to flex to meet these unique requirements.

WMS business processes are highly integrated between the physical handling and movement of products and the interactions with the software. Unlike the TMS model, where the physical movement of trucks is not integral to the TMS processes, WMS processes are tightly linked to the employee and the physical movement of products. Due to this tight linkage (and opportunity for improving the processes using industrial engineering), WMS processes are not a “one size fits all” situation.

Because WMS cannot be a “one size fits all” application, deploying a WMS as a traditional SaaS application can be problematic. Traditional single instance, multi-tenant SaaS is just not flexible enough to meet the unique processes required by a complex distribution center.

A cloud-based application has all the benefits of SaaS but provides the flexibility you would expect with an on-premise WMS. For distribution centers with unique processes, or processes that change frequently, a cloud-based WMS may provide increased flexibility over a traditional SaaS WMS.

Automated Material Handling Equipment Integration
A common objection I hear to cloud-based WMS is its ability to integrate with complex material handling equipment such as conveyor sortation systems, pick-to-light, carousel and automated storage and retrieval systems (ASRS). While the integration to this equipment must be carefully tested, it is possible to accomplish this integration with a cloud-based system (we are currently installing a cloud-based WMS for a customer using complex pick-to-light, automated picking and conveyor sortation). I certainly do not see technology barriers to integrating automated material handling equipment with a cloud-based WMS.

The Cloud vs. On-Premise
From a technology perspective, a cloud-based WMS can provide all the flexibility of an on-premise solution. So what are some considerations for a deploying via the cloud vs. on-premise? Here are few additional considerations to help with the decision.

Economic Model: Cloud-based deployments are priced based on subscription, which can minimize up-front capital expenditures for perpetual software licenses and server infrastructure.

Technology Management Competency: Many organizations are focusing on their core competencies and outsourcing tasks that are not within this scope. In many cases, technology infrastructure can be managed more effectively by the engineers who created the technology rather than your own IT organization.

Cost of Upgrades: WMS upgrades are often expensive and complex because of customization done to the WMS. With a cloud-based WMS, the software upgrades and updates are managed as part of the service by the technology provider. This can significantly reduce the cost and complexity of a WMS upgrade.

Summing it Up
Much has changed in the past three years. Cloud-based WMS is a viable option for even complex distribution centers. Unlike traditional SaaS approaches that have limited flexibility, cloud-based applications provide the flexibility and personalization of an on-premise solution with all the benefits of a fully managed solution. While cloud-based WMS may not be the right choice for every complex distribution center, it is certainly an option worth considering.

Chad Collins is Vice President of Marketing and Strategy at HighJump Software. He joined the company in 2002 and has more than 12 years of experience using technology to deliver innovative supply chain solutions. Prior to HighJump Software, he was in the supply chain practice of Cap Gemini Ernst and Young Consulting, where he managed supply chain technology projects for the world’s leading manufacturers. Mr. Collins holds a Bachelor of Science degree in electrical and computer engineering from Marquette University and an MBA in supply chain management from the University of Minnesota’s Carlson School of Management.

For Large, Complex Transportation Networks, It’s All About “The Solve”

Cloud/Software-as-a-Service | By •

Regular readers of Logistics Viewpoints know that Adrian and I are fans of multi-tenant, network-based transportation management systems (aka software-as-a-service TMS). These solutions take the burden of connecting to carriers and cleansing EDI messages off the back of the shipper. They also make it easier for a shipper to add new carriers if they have a problem lane. And shippers can leverage the network to access benchmark analytics in a way that is not possible with a single-tenant solution.

But, ultimately, what matters is ROI.

For most shippers, the biggest payback from a TMS comes from mode selection, LTL-to-TL consolidation, and routing optimization. In large, complex transportation networks, all of the advantages associated with multi-tenant solutions pale in comparison to the savings associated with transportation optimization.

At the JDA FOCUS 2011 conference last week, a presentation by PepsiCo brought this point home for me. What PepsiCo is doing with JDA’s single-tenant TMS solution amazed me.

PepsiCo is running a single instance of the TMS across the Americas to support its food and beverage products. The TMS supports a complex distribution network of over 100 manufacturing locations, 600 warehouses, and 200 suppliers. The network includes inbound moves from growers and suppliers to the plants, outbound moves to distribution centers, repackers, copackers, bins that support vending machines, the company’s direct store delivery operation, and shipments to customer DCs. PepsiCo executes 1.5 million shipments per year via its private fleet, dedicated fleets, and common carriers. The company’s transportation spend exceeds $2.2 billion and all of this is managed from a centralized TMS.

The TMS handles constraints and decision logic based on delivery commitments, product, customer, capacity commitments, preset appointments, preferred carriers by business unit and/or lane, and other factors. PepsiCo generates continuous moves for its private fleet. In some cases the optimization may be regional (e.g., West Coast), in other cases national. In some cases the same truck can be used only for one business unit (e.g., Tropicana), in other cases the same truck can be used to carry goods from different business units (perhaps, Quaker Oats and Lays). Its drop down for optimization encompasses 20 criteria. In short, this was the most complex and holistic transportation optimization problem I have ever come across.

The presenter did not disclose the savings PepsiCo has achieved, but I suspect it is massive. Procter & Gamble, for example, has told financial analysts that better transportation optimization will save it $200 million annually.

Thus, what really struck me is that for a network like PepsiCo’s, if an optimization engine from one TMS vendor performs even one tenth of a percent better than an engine from a different vendor, the difference could be worth millions of dollars in savings. Then it is necessary to tune the engine to get the most out of it. That is probably worth even more.

A couple of weeks ago, the TMS team from Manhattan Associates came in to brief us. Manhattan also prides itself on being able to solve complex optimization problems involving inbound and outbound, private fleets, and common carriers. Manhattan made the point that for big, complex problems, it is willing to customize the optimization engine—i.e., put in special math to solve a peculiar problem – to produce better savings. At the time, I thought customization is usually the wrong way to go. However, after hearing about PepsiCo’s network, I have rethought this. Again, if customization improves the solve even one tenth of a percent, it would be worth it, even if the customization makes the implementation take longer and future upgrades more difficult. Multi-tenant solutions, of course, are never customized.

In conclusion, multi-tenant solutions have a lot going for them. But for companies with very complex networks and large transportation spends, it really is all about “the solve.”

(Note: JDA Software and Manhattan Associates are ARC clients).

Architecture Does Matter for Supply Chain Applications

Logistics Technologies | By •

Earlier this spring, I attended a large software vendor’s user forum that focused on its supply chain solutions. I was particularly interested in hearing about the implementation of a warehouse management system (WMS) at a large grocery chain in Europe. Unfortunately, the speaker from the retail chain was from the IT department, and he spoke about master data, configuration switches, and integration with the enterprise system, all delivered in a monotone. As the speaker continued to babble, my eyes began to glaze over. I decided it was better to stealthily sneak out of the room than to fall asleep.

There’s a common saying that supply chain improvements are driven by people, process, and technology, but most supply chain executives that I know are far more passionate about process than technology. When technology is discussed, it is often in relationship to a process–i.e., how an application can enable a new and better process, and perhaps allow for the kind of optimal planning that no human could ever match.

Software architecture affects the depth of an application’s functionality, how quickly it can be implemented, and the speed of upgrade. Architecture also affects the ease with which ongoing changes can be made to supply chain processes, the degree to which information generated by the application can be used to drive continuous improvement, and the ease of collaborating with key partners. There is no single type of architecture that is “best” in all those areas. But certain architectures do allow for much better trade-offs across those benefit areas. In summary, it is clear that software architecture affects the ROI and qualitative benefits delivered by an application. But many of these architectural issues are still not well understood by the broader supply chain community.

The table below outlines what I view as the core architectural enhancements over the last twenty years; the reasons they matter; the applications they apply to most prevalently; and the trade-offs. The architectures are presented in the order in which they appeared in the marketplace.

Here I need to admit that I have never been an IT programmer, architect, or strategist. I’ve never even taken an IT course. My views are based on conversations I’ve had with many, many supply chain executives who have lived through implementations.

In addition, these are generalizations. There are ERP vendors, for example, that have introduced supply chain applications based on a standalone, best-of-breed architecture. These applications have very deep functionality. Further, while most multi-tenant TMS providers will readily admit that their solutions are not as functionally rich as the most robust single-tenant solutions, three vendors with multi-tenant solutions argue that they are capable of optimization every bit as complex and scalable as single-instance solutions. This is something I need to verify through future user interviews.

Some IT folks will notice  that I did not include Service Oriented Architecture (SOA) in the table. That’s because every software vendor I know claims they have an SOA architecture. For someone who is not an IT guy, it is impossible to verify if that is really true. Instead, I included Business Process Management configuration engines because even a non-techie can identify this architecture. It involves pulling process objects into a sandbox environment and snapping them together to create a task flow.

I also did not include mini-applications sold in an app store format, although I do consider this a very interesting new development (see “App Stores Come to the SCE Market” for additional commentary). If I were to write  a similar commentary in a few years, app stores might be on the list.

In conclusion, the architecture of supply chain applications does matter. Unfortunately, this is a topic that many supply chain managers do not pay enough attention to.

(Footnotes from table: #1, #2, and #3)

Guest Commentary: Knowing Where You Stand, Eliminating the Uncertainty in Transportation

Business Intelligence | By •

You can’t change the price of fuel, but you can optimize your supply chain to eliminate empty miles, require fewer trucks and ensure productive use of all resources.

“Supply chain uncertainty has been sited by many as a prime cause of increased costs,” according to a recent study by Tompkins Associates (Uncertainty Is Certain, Perceptions of Future Risk on the Rise, The Supply Chain Consortium, December 17, 2010). The study, based on a survey, goes on to say:

Uncertainty impacts the supply chain in four key areas:

  • Adding cost
  • Increasing inventory levels
  • Increasing lead-times
  • Reducing speed to market

Eighty-three percent of respondents are experiencing at least moderate cost increases as a result of uncertainty; 69 percent show a higher than average increase in lead-time; and 62 percent see their speed to market either moderately reduced or greatly reduced. In general, 60 to 80 percent of companies responding indicate that there is a high to medium impact from a cost and time standpoint due to uncertainty.

The first step to managing in the realm of uncertainty is to know where you stand by benchmarking your operation in terms of KPIs (performance and service) and rates (price). To have that you must establish what you want to measure, and how that measurement drives out cost while maintaining or sustaining service levels.

While transportation professionals possess the skills to maneuver through the challenging cycles of tight capacity or rising fuel costs, they often lack visibility into their immediate and long-term options available to overcome these hurdles.

This lack of visibility is inherent in manual transportation management processes, as well as on-premise software, where a transportation management system (TMS) is typically a ‘closed’ environment, lacking any sort of reference to what is happening outside a shipper’s operation. Benchmarking in that type of environment is usually against historical data or against budget, not against current market indices. Therefore, shipper options in turbulent times are limited by the scope of its current resources, which often leads to reactive transportation procurement and an uncomfortable degree of supply chain uncertainty.

Software-as-a-Service (SaaS) technologies, on the other hand, offer a single platform that yields a common data set for shared visibility into network activities. More importantly, this visibility empowers the collaborative Business Intelligence necessary for proactively managing the highly-variable nature of transportation activities.

Although much of the focus regarding BI has been at the strategic and tactical levels, many companies are striving to implement business intelligence at the operations level where it can be leveraged on a daily basis. This BI gives users enhanced visibility to operational metrics and exceptions, and also allows them to compare current results against historical data and planned targets.

The right TMS not only enhances supply chain visibility, but also serves as the central collector of data:

  • Distribution costs and rates
  • Network behavior
  • Supplier compliance
  • Internal and external resource performance
  • Department performance

Specifically, ‘knowing where you stand’ and having visibility over who is doing what in your supply chain, allows you to act on fact, not on hunches. It also ensures your knowledge set is comparable, if not more comprehensive, than any of your supply chain trading partners. This, in turn, allows you to:

  • Compare rates: use benchmarking to determine how your rates compare to those in the market.
  • Eliminate waste: identify ways to mitigate fuel costs for excessive dwell time, empty miles, rush or odd-lane LTL, poor appointment scheduling.
  • Become carrier friendly: regardless of where you are in a pricing and capacity cycle.
  • Negotiate from a position of strength: knowing which areas of your network are within norms and which are out of tolerance.
  • Develop predictive response or ‘Plan B”: identify redundant and alternate network options.
  • Identify areas of collaboration: network users may require capacity in lanes where you move less than truckload.
  • Evaluate true cost of service: identify those areas where you’re paying for superior service when it is not required.
  • Unbundle inbound charges: take control of inbound transportation.
  • Exercise greater control over spend discipline within the organization, with all transportation buys factored against the latest index.

Information is great, but knowledge is power. Utilizing today’s enhanced data and performance information and leveraging the visibility that can be gained through the use of enabled technologies is the genesis for managing and eliminating uncertainty in our respective supply chains.

Jeff Potts, a co-founder of LeanLogistics, is Vice President of Sales at the company responsible for overall sales and customer relationships for the Eastern region. Jeff has 25 years of experience in the logistics industry and prior to LeanLogistics was Senior Vice President for a Third-Party Logistics Company where he managed operations, sales, business development, logistics engineering, warehousing, and transportation.

Guest Commentary: TMS Adaptability: A Critical Factor in Delivering Long-Term Value

Guest Commentary | By •

Companies searching for a transportation management system (TMS) often focus on the wrong objectives. Since most companies do not have an existing TMS, they tend to look at short-term automation goals and neglect the long-term ability of the software to adapt to their fast-changing operations. And for companies that already have a TMS and are looking to replace it, they have come to realize that software products by themselves rarely drive innovation in their organizations. Typically, and at best, these implementations drive automation more than innovation, and once the automation is realized, the bloom is quickly off the rose and companies find themselves right back where they started.

What many companies fail to realize when looking for a TMS is that the biggest asset they are acquiring is the software’s architecture, yet this is often ignored in the buying process.

One of the most common reasons a TMS fails to deliver sustained, long-term value is the software’s inability to rapidly adapt to change. I break TMS adaptability into two types:

1.     Process-driven adaptability inherent in the software architecture;
2.     Automated adaptability where the software changes the behavior automatically based on process feedback such as KPI’s, rates, etc.

While automated adaptability is somewhat sexy, it is process-driven adaptability that allows an organization to create innovative solutions that differentiate it in the industry. Today’s TMS solutions should allow users to easily and quickly configure process workflows to support, for example, different types of freight or even different organizations within the corporation. When you combine those process steps with business-driven triggers and rules, the end result is a solution that differentiates the logistics team.

For logistics service providers, these innovative and unique solutions enable them to provide both managed freight and brokerage services for their clients. They can even go a step further, if desired, to provide unique solutions for a given client. The logistics provider now focuses on processes to create efficiencies as desired and demonstrate unique value. They are not paying for costly software changes or to maintain their own systems. The adaptable software allows them to differentiate themselves through people and process and adapt to whatever a customer desires them to do.

Adaptable TMS works equally well for shippers. As acquisitions occur, the business often demands changes. A TMS architected to adapt enables shippers to adjust their solution accordingly. I often think back to my days when I worked for a large computer company. The company started out shipping one mainframe computer in three to five tractor-trailer loads per customer. (Funny, but my current laptop probably has more power than some of those computers that filled raised-floor datacenters). By the time I left that company ten years later we were shipping three to five customers per trailer load. That change required us to buy a new TMS that allowed us to plan and optimize customer orders to maximize client shipping. The system we had been using before did not allow us to consolidate orders onto a single truckload move. Instead of having to invest in a new TMS, it would have been nice if we could have just adapted our existing solution to meet our ever-changing requirements. The company is probably shipping computers via parcel carriers now.

Shippers are also using adaptive TMS solutions to manage the risk of outsourcing their logistics operations. Many shippers are now deploying TMS software and then hiring third-party logistics companies to run their operations using the software. This allows the shipper to better measure the 3PL’s performance since they own the data and help setup the measurements to manage the relationship. If the logistics provider fails to provide value or the business changes and different skills are required, the software is ready to adapt. This makes the outsourcing decision much less risky since the outsourcer or the outsource decision may be changed as needed. Thus the shipper is using the 3PL for their logistics expertise not their proprietary software.

Another area of TMS adaptability is what analysts refer to as embedded analytics. As the TMS collects information, the data is analyzed and the results are fed back into the solution, which are then used to alter processes automatically in response to changes. For example, carrier performance may be fed back into the carrier selection process to change the ranking of certain carriers. Average and industry lane rates may be fed into the system to help shippers determine quote targets for spot market rates. The information gathered through the execution process helps the system adapt automatically to changes in real-time as they occur.

So, as stated earlier, software solutions by themselves rarely drive innovation and rarely differentiate a company. But software solutions with flexible, adaptable architectures enable companies to innovate and differentiate without having to custom build costly IT systems. Adaptable TMS solutions allow companies to focus on differentiating their transportation processes, not building and maintaining software. You don’t want to be arguing that your TMS solution only satisfies 88% of your requirements—this might sound like you are selling 88% all-beef tacos. Makes you wonder what is going on with the other 12%.

Steven Blough is founder and President of MercuryGate International, a best-of-breed TMS software provider.

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